Transporte Internacional & Supply Chain Integration

1. Transporte Internacional & Supply Chain Integration US- Mexico Chamber of Commerce Dallas - Irving - Fort Worth, TEXAS September 2008

2. Business Environment Logistics in Mexico Challenges

3. Business Environment • Corporate Structure: trends Multinational Corporations & Globally Integrated Corporations

4. Business Environment • Multinational Corporations • Foreign markets expansion • Product Development: focus on covering the need of the selected local market • Establish individual full operation in foreign markets • Utilize local labor and raw materials as much as possible according to availability • Bring manufacturing processes, supervisors and adjusted original designs to satisfy local needs • Generate changes in local markets

5. Business Environment • Globally Integrated Corporations • Foreign markets expansion • Product Development: focus on global market demands • Sources, manufacturing plants and raw materials are located in different countries/ regions • Specialization of the Supply Chain participants • Outsourcing • Generate changes on the participants of the Chain Supply

6. Multinational Corporation

7. Globally Integrated Corporation

8. Logistics & Distribution • Mexico

9. Logistics • 206,314 miles of Highways • 75% of freight is mobilized over the road Source: SCT

10. Logistics Ferromex UP KCSM Ferrosur Trans- ístmico Chiapas - Mayab Coahuila - Durango • 16,560 Railroad miles • 17% of freight is mobilized on rail Source: SCT

11. Logistics ENSENADA • 17 Sea entry ports • 7.5% of freight is mobilized by sea cargo GUAYMAS ALTAMIRA MAZATLAN TAMPICO PROGRESO TUXPAN VERACRUZ COATZACOALCOS MANZANILLO LAZARO CARDENAS Source: SCT SALINA CRUZ

12. CHALLENGES working with GLOBALLY INTEGRATED CORPORATIONS

13. Logistics Challenges: JIT capabilities Information technology (WMS, TMS, RFID) Transportation Compliance Security Distribution Cultural Diversity

14. Logistics • What to look for in a 3th Part Logistic Organization (3PL) 1) Industry expertise 2) Information Technology 3) Infrastructure 4) Alliances with other service providers 5) Specific programs and Logistics Solutions

15. Logistics Foreign Suppliers Program • What are the benefits: • Safe inventory storage for in-bond shipments • Allows Just In Time deliveries • Limited Income Tax Exposure (Foreign suppliers without presence in Mexico) • Deferment of all Import Duties and Taxes (Until goods are extracted from the in-bond areas/warehouse) • Domestic & International Distribution Center

16. Logistics Foreign Suppliers Programs • Who benefits: • Manufacturing Plants • Manufacturers under IMMEX Program • Foreign suppliers and distributors without presence in Mexico • Mexican importers

17. Logistics Foreign Suppliers Programs • Who can provide the service: • √ IMMEX certified entity • √ A bonded warehouser Level 1 (Almacenadoras) • Registered as an Auxiliary Credit Organization before the Secretaria de Hacienda y Crédito Publico (SHCP) • Authorized by the SHCP to operate under the Mexican In-Bond Regime (Regimen de Deposito Fiscal Mexicano) • Certified by the Mexican Customs Administration • Source: SHCP

18. IMMEX BONDED WH PLANT 2 PLANT 1 Logistics NEGOCIATE AGREEMENT SUPPLIER MANUFACTURER 2 MANUFACTURER 1 • THE SUPPLIER MOVES GOODS • NEAR BY THE MANUFACTURING PLANT • IN-BOND STATUS • THE IMMEX / BONDED WAREHOUSER IMPORTS GOODS • REGISTER GOODS FOR PROPER • INVENTORY MANAGEMENT • READY FOR “ J I T” DELIVERY TWO WAYS TO EXTRACT SUPPLIES FROM BONDED WAREHOUSE • PLANT REQUESTS INVENTORY RELEASE • WAREHOUSE DELIVERS TO THE PLANT • PLANT REQUEST S THE SUPPLIER • TO INSTRUCT WAREHOUSE • TO DELIVER TO PLANT. • DELIVERY TAKES PLACE. • SUPPLIES ARE TRANSFERRED AS VIRTUAL • EXPORTS TO THE MANUFACTURING PLANTS • INVENTORY DISCHARGE

19. Dallas Office Leopoldo Prendes Business Development Manager - NA 972-281-6274 E-mail: lprendes@accelonline.com

20. Cultural Diversity • Corporate • Build strong relationship • Personalized costumer care • Partnership • Flexibility • Long term goals oriented • Participant in the decision making process • Compatible

21. Cultural Diversity • Ethnic / region • Awareness • Human factor • Auto evaluation • Different region different meaning • Tolerance to other groups • Flexibility • Open to learn

22. Case Study : Industry: Design, engineering, testing and manufacturer of auto parts Company profile: Original Equipment Manufacturer (OEM) Operations: Europe, Asia, the Americas Description of goods: 4,000 pound steel coils Origin and destination: Ontario, Canada – Nuevo Leon, Mexico Transportation: Rail (preferred) or truck (secondary)

23. First approach by the manufacturer : Quantity: 45,000 pounds of steel Frequency: weekly Type of service: door to door delivery Transportation: rail or truck (previously by truck) Considerations: manufacturing plant can process maximum of 45,000 pounds a week

24. Landed cost : RAIL TRUCK Transportation: USD$ 9,953.00 $ 5,820.00 Fuel surcharge: $ 924.00 Included Trans/load Origin: $ 1,425.00 n/a Trans/load Destination: $ 1,500.00 n/a Customs Broker fee $ 500.00 $ 500.00 One per week total cost: $ 14,302.00 $ 6,320.00 One month total cost: $ 57,208.00 $ 25,280.00 Capacity used ¼ of a rail car maximum

25. Review : • Plant manufacturing capacity by month = Maximum 190,000 pound aprox. • 1 Railcar maximum capacity = 190,000 pounds / 40-45 steel coils • JIT delivery required • Warehouse cost • Simplification of the logistics process • Rail cost VS truck cost and capacity • Border crossing cost

26. Final proposal : RAIL RAIL TRUCK Transportation: $9,953.00 $ 9,953.00 $ 5,820.00 Fuel surcharge: $ 924.00 $ 924.00 Included Trans/load Origin: $ 1,425.00 $ 1,425.00 n/a Trans/load Destination: $ n/a $ 1,500.00 n/a Customs Broker fee $ 500.00 $ 500.00 $ 500.00 One per week total cost: n/a $ 14,302.00 $ 6,320.00 Warehouse cost: $ 3,500.00 n/a n/a (Includes space, handling, trans/load & 4 deliveries by truck) One month total cost: $ 16,302.00 $ 57,208.00 $ 25,280.00 Capacity used 97 % of a railcar ¼ of a rail car maximum